Trading with BIG money

Filed under: Learn Forex Trading |

 

Although you should trade the same way with the same methodology whether you trade with a bank of $500 or a bank of $500,000, this is not always the case. If you are trading with a bank of $500, many beginner traders will feel comfortable risking $25 on one trade. But this is 5% of your bank, which is actually a little too high. With a bank of $500,000, a 5% risk level would equate to $25,000! As you can see now that the amounts have changes, this IS way too high! However, whether you trade with a bank of $500 or a bank of $500,000, your method should not change.

 

I trade with a risk level of 1% on each trade. With a bank of $500, this would be just $5. With a bank of $500,000, it would be $5000. As people want to get rich quickly, if they have a small bank as their capital, they tend to risk high levels on each trade in order to try to increase their bank quickly so that they have more to trade with. This is one of the reasons why many beginner traders wipe out their banks very quickly – because their money management and risk levels are all over the place.

 

If you can create a winning method with a small bank, then you can be sure that the same method will also work with a large bank, providing that you can handle the larger sums of money with regards to your emotions and psychology. If you were trading with large sums of money, would you be more inclined to change your system and take profits early or move your stops up? Try imagining that every trade that you make is for a large sum of money, and create a trading plan around this. This way, you can plan for the future – a future in which, if you are fortunate, will involve trading with those large sums of money.

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